Four tips that'll help you choose the points card that'll offer the most perks for you.
If you've ever felt the joy of cashing in your reward points—to book a free flight or pay off your card balance without spending a cent—you know why reward credit cards are an essential part of your wallet. They've been around since the 1980s, and on average, 60 percent of all credit cards have some form of reward (be it points, cashback or other incentives) attached to them. There are no shortage of options out there....so which one makes the most, uh, cents for you?
Here are a few things to consider before committing to that plastic.
1. Know yourself
All the rewards points in the world will be for naught if you're getting yourself into financial trouble to earn them. As a strategy, putting everything possible through your credit card is the best way to rack up points as fast as possible. That only works, however, if you're paying that balance off every month. If you're carrying a balance, it's likely that whatever you're paying in interests completely writes off any free flights or other perks you may be scoring off that debt.
If you feel like playing the rewards card game is going to tempt you into spending beyond your means, consider a debit rewards card. Many are tied to a specific retailer's loyalty program, so it only make sense if it's a store or business you'd get use out of. The Scotiabank Scene debit card, for instance, is great for earning free movies...as long as you're someone who actually cares to watch the latest flicks.
2. Know what you want
And that's the key thing about selecting a rewards card: There's no point in racking up points for things you'll never actually splurge them on. If you're not into travel, there's no point in a card that mainly gives you rewards to put towards flights and hotels. And there's definitely no point in paying the annual fee that often accompanies a rewards card. As you consider a card, make sure the math actually makes sense: If you're paying $150 as an annual fee, for instance, but only getting $50 worth of value out of the card, that shiny piece of plastic is costing you money, not saving it. It's worth noting—however, some of that “value” may come in other perks the card has, like trip cancellation insurance or auto rental coverage, for instance.
3. Know what you do
It's important to find a card that rewards you for the way you already live. If, for instance, you're not someone who dines out a lot, there's no point in having a card that offers 4x the points on restaurant purchases. Same goes for non-drivers, who will find 2x the points on gas a little bit pointless for them. But if you're someone who likes to pre-authorise their bills anyway, a card that offers a 2% cashback for those transactions is perfect. True points fiends will have multiple cards to which they will tailor their purchases since cards tend to differ on which categories they reward more generously.
4. Know when it's over
Most rewards credit cards come with an attractive sign up bonus, be it a nice chunk of points up front, or having the annual fee waived for the first year, or getting accelerated earnings rates in certain categories. These perks, however, tend to expire within the first 12 months. After that honeymoon period is over, pay attention to whether the card is still as rewarding to you without them. If not, it's time to start shopping around for your next points powerhouse.